NEW ZEALAND BANKS AND OTHERS.

Globe, Volume V, Issue 537, 8 March 1876, Page 3

NEW ZEALAND BANKS AND OTHERS.

I To the Editor of the Globe. Sib,—lt seems that the last letter on Banking opened the eyes of most people to understand our danger, and my reason for c Dining before the public ; but, in discussing the principles with traders, I have met with two such queer pieces of ignorance on the part of members of the Chamber, that it is , as well to expose the error, and answer it. Says one—" It is all very well, but the other New Zealand Banks do just the same, they all overtrade, theylare all in the same mess as the Bank of New Zealand." Says another—- " Well, but the Union Bank of Australia counts its capital of a million several times over, first in Australia, then in London, then in New Zealand." Now I reply to these members of the Chamber of Commerce, that if they will take the Home News of 13th January, just placed on the table of the Public Library, they will see how utterly wrong they are : Union Bank of Australia, capital £1,250,000 Deposits 4,097,000 Bills and Reserve for Bad Bills 874.000 Notes 363,000 Total Cash Liabilities £5,334,000 Cash and Invested Fund ... 1,310,000 (about 25 per cent) Discrepancy £4,024,000 (about 3 times cash) Bank of South Australia. Deposits £925,000 Bills, &c 162,000 Notes 91,000 Total Cash Liabilities £1,178,000 Cash held 209,000 (about 19 per cent) Discrepancy 969,000 (about 4£ times cash) The South Australian Bank seems to have invested its reserve in Government securities, £226,000, but does not expressly state so, although in other respects their accountant seems to know how to present the accounts better than any of the other Banks. Thus he divides liabilities to the public from liabilities to the shareholders—a thing that I have always wondered " why the other Banks did not do ?" And again, he separates the real cash from cash balances due, the very thing I called attention to before, although he does not show his Reserve Fund, as he should do, like the Union Bank of Australia for instance—£2so,ooo set apart invested in guaranteed security, convertible instantly, and therefore to be counted as cash. I recommend Mr Beeves, the Chairman of our New Zealand Shipping Company, to read the Union Bank of Australia's statement, especially the profit and loss account, so admirably set out that even a thickhead must understand it, and persons of judgment can calculate the cost of government. I hope the following remarks will be well pondered by the managers of the Bank of New Zealand :

1. The capital of the Union iB more than double the capital of the Bank of New Zealand. 2. The Union hold more than double the cash of the Bank of New Zealand. 3. The Union owe £2,600,000 less than the Bank of New Zealand. 4. The Union pay a larger dividend than the Bank of New Zealand in cash. 6. The reserve of the Union is £70,000 more than the Bank of New Zealand, and it is splendidly invested in guaranteed debentures. 6. The notes issued by the Union are £60,000 less than the Bank of New Zealand. So the Union is in a magnificent position compared to the Bank of New Zealand—stronger in capital, stronger in cash, stronger in having a real reserve, stronger in having a smaller note in circulation —and yet paying 16 per cent instead of 15, as the Bank of New Zealand. If the commercial public of New Zealand fail to understand this, it will be well understood on the Loudon Stock Exchange, to which this letter goes per mail, for it seems useless to seek either justice or truth in New Zealand. Finally, to the totally ignorant we may put itBank of New Zealand holds £8 10a—for every £IOO it owes in cash. Union Bank holds £2s—for every £IOO it owes in cash. Bank of New Zealand, with less than half the capital of the Union, yet owes £2,600,000 more than the Union in cash; but still all men of sound sense must admit that even the Union should raise its capital to £2,C00,000 for three reasons: — 1. Trade is in its infancy in the Pacific, it must grow. 2. It is better to employ your own capital, than to use other peoples, and pay them interest for it, when also your position is 1 million of your own to 4 millions of other peoples. 3. The business, take it all round, is too large for anything less than £2,000,000 (two millions) of capital. On running over the last 100 years of banking in all parts of the world, I have concluded that 33 per cent is the lowest safe margin of cash to cash ;liabilities. Look at the whole of the United States Banks, insolvent beoause they did not do so. The Bank of France proves thatwir is not the sole cause of the wretched stats of things in America ; the French had a worse war, but their Bank is confessed to be better than the Bank of England, because the margin of cash is good. As to the Bank of New Zealand, the Government ought to interfere and fore 3 it to assume a sound public position—perh <pe by increase of capital to £2,000,000, and a charter as suggested by me. I see-tin Ministry have so far listened to me, that they propose to withdraw some of on money from the Bank of New Zealand to invest it in Interest bearing security eg I

proposed. See, however, the Chancellor _of the University last week—" I have not invested the Trust money," says he, " because I saw no good investment." Surely we want a Funded Debt available here for Trusts. Yours, &c, J. W. TREADWBLL. (We append copy of the two statements.)

UNION BANK. Statement of Liabilities and Assets (At the branches on the 30th of June, and at the London office on 31st of December, 1875.)

LIABILITIES. £ 8. d. Circulation ••• 363,104 15 0 Deposits 4,097,375 17 11 Bills payable and other liabilities (including reserves held against doubtful debts) 874,022 7 3 Balance of undivided profits 106,991 10 8 Reserve fund as per contra 250,000 0 0 Building and other reserve funds 150,000 0 0 Capital • ••• 1,250,000 0 0 10 £7,091,494 10 ASSETS. Specie on hand and cash balances 1,018,577 16 6 Bullion on hand and in transitu ... 41,125 6 2 Bank premises and property 169,993 14 8 Government securities 177,636 13 9 Local bills, bills receivable, and other securities 6,434,160 19 9 Reserve fund, invested as per statement 250,000 0 0 £7,091,494 10 10 STATEMENT OF PROFITS. Balance of undivided profit at 30th June, 1875 106,471 14 3 Out of which a dividend was declared of Leaving a balance of Profits of the past 100,000 0 0 £6,471 14 3 half-year, after making provision for all bad and doubtful debts £152,904 15 9 Less salaries, general working expenses, and income tax ... 52,384119 4 Balance of undivided profits at this 103,519 16 5 date £106,991 10 8 RESERVE FUND. New Zealand Imperial 4 per cent debcutuicd 200,000 0 0 Colonial 6 per cent debentures 50,000 0 0 £250,000 0 0 London, January 6,1876. BANK OP SOOTH AUSTRALIA. LIABILITIES. Promissory notes in circulation not bearing in'crest 91,401 0 0 Bills of exchange in circulation not bearing interest 149.004 19 7 Balances due to other Banks 13,145 15 9 Cash deposited not bearing interest 217,130 5 7 Cash deposited bearing interest ... Total due to the public 707,563 4 10 1,178,245 5 9 Capital paid up ... £500,000 0 0 Eeservefund ... 125.000 0 0 Profit and loss ... 60,636 0 7 Due to shareholders 675,636 0 7 £1,853,881 6 4 ASSETS. Coin and bullion ...£162,072 6 2 Balance due from other Banks [.., 57,158 2 4 209,230 8 6 Promissory notes or bills of other banks 1,097 0 0 Government securities 225,874 10 0 Landed or other property of the Corporation 37,520 0 0 Notes and bills discounted, or other debts due to the Corporation not included under the foregoing heads 1,380,169 1 10 £1,853,381 6 4 Profit and loss account for the half-year from December 31st, 1874, to June 30th, 1875 :— LIABILITIES. Dividend paid July 15th, 1875 ... 25,000 0 0 Expenses of the establishment, including directors' and auditors' remuneration, officers' salaries, building expenses, rent, taxes, stationery, income tax on net profits, &c 17,632 1 6 Balance carried forward 60,636 0 1 £93,268 2 1 ASSETS. Balance brought forward 64,604 11 8 Interest on reserved fund 3,419 7 4 Profits from all offices ... ... 35,344 3 1 £93,268 2 1